BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
                              Senator Ben Hueso, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 33             Hearing Date:    6/13/2016
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          |Author:    |Quirk                                                |
          |-----------+-----------------------------------------------------|
          |Version:   |6/6/2016    As Amended                               |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Jay Dickenson                                        |
          |           |                                                     |
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          SUBJECT: Electrical corporations:  energy storage systems

            DIGEST:  This bill makes new pumped hydroelectric storage  
          facilitates eligible for any increased energy storage system  
          targets adopted by the California Public Utilities Commission  
          (CPUC).

          ANALYSIS:
          
          Existing law:
          
          1)Defines "load-serving entity" (LSE) as an electrical  
            corporation (investor-owned utility, or IOU), energy service  
            providers (ESP) or community choice aggregators (CCA).   
            (Public Utilities Code 380(k)) 

          2)Requires the CPUC to determine appropriate targets, if any,  
            for LSEs to procure energy storage systems.  Requires LSEs to  
            meet any targets adopted by the CPUC by 2015 and 2020.   
            Requires publicly owned utilities (POUs) to set their own  
            targets for the procurement of energy storage and then meet  
            those targets by 2016 and 2021.  (Public Utilities Code 2835  
            et seq.) 

          3)Directs the California Energy Commission (CEC) and the CPUC,  
            where feasible, to authorize procurement of resources to  
            provide grid reliability services that minimize reliance on  
            system power and fossil fuel resources and, where feasible,  
            cost effective, and consistent with other state policy  
            objectives, increase the use of large- and small-scale energy  
            storage.  (Public Utilities Code 400) 








          AB 33 (Quirk)                                          PageB of?
          

          This bill declares pumped hydroelectric storage facilities  
          eligible for any increases in energy storage procurement targets  
          adopted by the CPUC on or after January 1, 2017. 

          

          Background

          Law requires procurement of energy storage systems.  AB 2514  
          (Skinner, 2010), required CPUC to determine appropriate targets,  
          if any, for LSEs to procure energy storage systems by 2015 and  
          2020.  The bill also directed POUs to set their own comparable  
          energy storage system procurement targets. 


          In October of 2013, the CPUC determined energy storage system  
          procurement targets applicable to the IOUs.  The CPUC set  
          interim and final targets for the state's largest IOUs - Pacific  
          Gas and Electric (PG&E), San Diego Gas and Electric (SDG&E) and  
          Southern California Edison (SCE) - that, in 2020, require the  
          three IOUs, together, to procure 1,325 megawatts of energy  
          storage.<1>  The CPUC decision, while acknowledging that large  
          pumped hydroelectric facilities meet the statutory criteria  
          provided AB 2514, explicitly excluded pumped hydroelectric  
          storage facilities greater than 50 megawatts.  The CPUC  
          justified this exclusion as follows:


               The sheer size of pumped storage projects would dwarf other  
               smaller, emerging technologies; and as such, would inhibit  
               the fulfillment of market transformation goals.  The  
               majority of pumped storage projects are 500 MW and over,  
               which means a single project could be used to reach each  
               target within a utility territory.  


          The CPUC, not unreasonably, concluded that an IOU could meet its  
          storage obligation through procurement of a single, large  
          pumped-storage project, thereby crowding out smaller, emerging  
          storage technologies.  Such an outcome, the CPUC concluded,  
          would contradict the goal of energy storage market  

          ---------------------------


          <1> See CPUC Decision 13-10-040.








          AB 33 (Quirk)                                          PageC of?
          
          transformation.


          The CPUC reports the IOUs have each progressed in meeting their  
          energy storage procurement goals. However, none has yet met its  
          final procurement goal in any category, other than SCE, which  
          has already exceeded the procurement goal for customer-side  
          storage.  Of course, in keeping with the CPUC's program rules,  
          this procurement includes no large-scale pumped hydroelectric  
          storage facilities.


          Large pumped hydroelectric facilities in California.  Use of  
          hydroelectric facility to store energy is not new in California.  
           According to the CPUC, there are seven pumped storage  
          facilities that participate in the markets of the California  
          Independent System Operator (CAISO), as shown below:




           ------------------------------------------------------- 
          |California Existing Pumped Storage Facilities          |
          |                                                       |
           ------------------------------------------------------- 
          |--------------+--------+------------------------------|
          |     Name     |Capacity|            Owner             |
          |              |   1)   |                              |
          |              |        |                              |
          |--------------+--------+------------------------------|
          |   Castaic    |  1250  |        LADWP3)/DWR2)         |
          |              |        |                              |
          |--------------+--------+------------------------------|
          |    Helms     |  1200  |   Pacific Gas and Electric   |
          |              |        |                              |
          |--------------+--------+------------------------------|
          |   San Luis   |  440   |            DWR2)             |
          |              |        |                              |
          |--------------+--------+------------------------------|
          |    Hyatt     |  387   |            DWR2)             |
          |              |        |                              |
          |--------------+--------+------------------------------|
          |   Eastwood   |  200   |  Southern California Edison  |
          |              |        |                              |
          |--------------+--------+------------------------------|









          AB 33 (Quirk)                                          PageD of?
          
          |  Thermalito  |   84   |            DWR2)             |
          |              |        |                              |
          |--------------+--------+------------------------------|
          | Lake Hodges  |   40   |  San Diego Water Authority   |
          |              |        |                              |
          |--------------+--------+------------------------------|
          |   Diamond    |   40   | Metropolitan Water District  |
          |    Valley    |        |                              |
          |              |        |                              |
          |--------------+--------+------------------------------|
          |    O'Neil    |   12   |   United States Bureau of    |
          |              |        |         Reclamation          |
          |              |        |                              |
          |--------------+--------+------------------------------|
          |    TOTAL     | 3,653  |                              |
          |              |        |                              |
           ------------------------------------------------------ 
           ------------------------------------------------------- 
          |1) In megawatts.                                       |
          |                                                       |
          |2) California Department of Water Resources.           |
          |                                                       |
          |3) Los Angeles Department of Water and Power.          |
          |                                                       |
           ------------------------------------------------------- 

          The CPUC also notes that procurement rules allow pumped storage  
          to compete with other energy resources to meet a utility's  
          reliability needs and reports several additional proposed pumped  
          storage projects:



           ------------------------------------------------------------------- 
          |California and  Proposed Pumped Storage Facilities                 |
          |                                                                   |
          |                                                                   |
           ------------------------------------------------------------------- 
          |-----------------+--------+-----------------------+----------------|
          |      Name       |Capacity|    Developer/Owner    |    Location    |
          |                 |   1)   |                       |                |
          |                 |        |                       |                |
          |-----------------+--------+-----------------------+----------------|
          | Eagle Mountain  |  1300  |      Eagle Crest      |   Riverside    |
          |     Project     |        |                       |     County     |









          AB 33 (Quirk)                                          PageE of?
          
          |                 |        |                       |                |
          |-----------------+--------+-----------------------+----------------|
          |  Lake Elsinore  |  600   |     Nevada Hydro      |    Eastern     |
          | Pumped Storage  |        |                       |   Riverside    |
          |     (LEAPS)     |        |                       |     County     |
          |                 |        |                       |                |
          |-----------------+--------+-----------------------+----------------|
          |  San Vincente   |  500   | City of San Diego/San |   San Diego    |
          |     Project     |        |  Diego County Water   |     County     |
          |                 |        |       Authority       |                |
          |                 |        |                       |                |
          |-----------------+--------+-----------------------+----------------|
          |Mulqueeney Ranch |  280   | Brookfield Renewable  | Altamont Pass  |
          |                 |        |     Energy Group      |                |
          |                 |        |                       |                |
          |-----------------+--------+-----------------------+----------------|
          |      TOTAL      | 2,680  |                       |                |
          |                 |        |                       |                |
           ------------------------------------------------------------------- 
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          |1) In                                                              |
          |megawatts.                                                         |
          |                                                                   |
          |                                                                   |
          |                                                                   |
           ------------------------------------------------------------------- 

          Many purposes of energy storage procurement targets. The CPUC  
          did not act unreasonably in concluding the energy storage goals  
          of AB 2514 included market transformation:  implicit in the  
          imposition of procurement targets is the goal of altering market  
          outcomes from what they would otherwise be.  However, whatever  
          its implicit goals, AB 2514 stated a number of explicit goals to  
          be achieved by the energy storage procurement program.  Those  
          explicit statutory goals include:


                 Integration of intermittent generation from eligible  
               renewable energy resources into the reliable operation of  
               the transmission and distribution grid.


                 Allowing intermittent generation from eligible renewable  
               energy resources to operate at or near full capacity.










          AB 33 (Quirk)                                          PageF of?
          

                 Reducing the need for new fossil-fuel powered peaking  
               generation facilities by using stored electricity to meet  
               peak demand.


                 Reducing purchases of electricity generation sources  
               with higher emissions of greenhouse gases.


                 Eliminating or reducing transmission and distribution  
               losses, including increased losses during periods of  
               congestion on the grid.


                 Reducing the demand for electricity during peak periods  
               and achieve permanent load-shifting by using thermal  
               storage to meet air-conditioning needs.


                 Avoiding or delaying investments in transmission and  
               distribution system upgrades.


                 Using energy storage systems to provide the ancillary  
               services otherwise provided by fossil-fueled generating  
               facilities.


          Large-scale pumped hydroelectric facilities, like smaller energy  
          storage systems using varying technologies, have the potential  
          to meet these statutory goals.  For this reason, the CAISO -  
          always preoccupied with the management of intermittent renewable  
          energy resources - recently urged the CPUC to consider (1)  
          increasing current energy storage system procurement targets to  
          allow for large storage resources while not undermining support  
          for smaller and newer technologies, and (2) earmarking capacity  
          within those procurement targets specifically for pumped  
          storage.<2>  


          ---------------------------
          <2>  COMMENTS OF THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR  
          CORPORATION ON TRACK 2 ISSUES, filed February 2, 2016.










          AB 33 (Quirk)                                          PageG of?
          
          No reason to exclude large pumped hydro, but? There is no  
          obvious, compelling reason why the energy storage procurement  
          targets adopted by the CPUC must exclude pumped hydroelectric  
          storage facilities.  Such facilities have the potential to meet  
          the program's statutory goals, such as the integration of  
          intermittent renewable energy resources.  However, the CPUC was  
          right to worry that utilities could meet their storage targets  
          by reliance on a small number of very large pumped hydroelectric  
          storage facilities.  Such an outcome may harm smaller,  
          still-developing storage technologies.  Bill proponents contend  
          smaller and distributed storage technologies already are  
          well-provided for by state procurement targets and subsidies. 


          In any case, existing statute already makes large pumped-storage  
          eligible for the CPUC's storage targets.  Therefore, this bill  
          simply restates, with emphasis, existing law.  


          To make clear that existing law does not prevent the CPUC from  
          making pumped hydroelectric storage facilities of any size  
          eligible to meet future energy storage targets the CPUC may  
          adopt, and to ensure the CPUC maintains discretion in adopting  
          future energy storage targets in order to best achieve the  
          state's energy and environmental goals, this analysis recommends  
          the author amend this bill, as follows:



               Public Utilities Code 2836.8.
                (a)    Beginning January 1, 2017, if the commission  
                 increases the targets for a load-serving entity to  
                 procure viable and cost-effective energy storage systems,  
                 pumped hydroelectric storage facilities of any size that  
                 become operational on or after January 1, 2017, shall be  
                 eligible   without limit  to the extent that those  
                 facilities meet otherwise applicable requirements.
               (b)    Subdivision (a) is iterative of existing law and  
                 does not limit the commission's discretion in developing  
                 or adopting targets for a load-serving entity to procure  
                 viable and cost-effective energy storage systems.
           
           Double Referral. Should this bill be approved by the committee,  
          it will be re-referred to the Senate Committee on Environmental  
          Quality for its consideration. 









          AB 33 (Quirk)                                          PageH of?
          

          Prior/Related Legislation
          
          AB 2514 (Skinner, Chapter 469, Statutes of 2010) required CPUC  
          to determine appropriate targets, if any, for LSEs to procure  
          energy storage systems.  The bill required LSEs to meet any  
          targets adopted by the CPUC by 2015 and 2020.  The bill required  
          POUs to set their own targets for the procurement of energy  
          storage and then meet those targets by 2016 and 2021. 

          SB 886 (Pavley, 2015) requires the CPUC to adopt energy storage  
          system procurement targets applicable to every load-serving  
          entity and the governing board of each local publicly owned  
          electric utility to adopt comparable energy storage procurement  
          targets; requires each load-serving entity and locally owned  
          public electric utility to plan for the procurement of energy  
          storage systems before fossil-fuel-based generation; and  
          requires each electrical corporation to propose measures to  
          encourage customers to install energy storage systems. The bill  
          passed the Senate 25-14 and is pending referral in the Assembly.

          AB 1258 (Skinner, 2013) would have required the CEC to perform a  
          technical analysis of the potential uses of existing  
          hydro-electric and pumped storage facilities to provide  
          additional operational flexibility to integrate eligible  
          renewable energy sources into the grid. The bill was held in  
          Assembly Committee on Appropriations.
          
          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          No


            SUPPORT:  

          Association of California Water Agencies
          Brookfield
          Clean Power Campaign
          EDF Renewable Energy
          Eagle Crest Energy, Inc.
          San Diego County Water Authority

          OPPOSITION:

          None received










          AB 33 (Quirk)                                          PageI of?
          
          ARGUMENTS IN SUPPORT:    According to the author:

               When CPUC implemented AB 2514 (Skinner, 2010)  
               [D.13-10-040], the CPUC elected to place an arbitrary  
               restriction on what types of energy storage would satisfy  
               the procurement mandate. It determined that any pumped  
               hydroelectric storage project over 50 megawatts (MW) in  
               size would not qualify.  Unfortunately, this means that  
               large-scale pumped hydroelectric storage does not satisfy  
               any of the numerous requirements placed on IOUs. Because it  
               does not "check a box" for the utilities, there is very  
               little for a utility to procure it. This is despite pumped  
               storage being cost-effective and important in helping the  
               state integrate additional renewable energy onto the grid.

               AB 33 allows IOUs to purchase pumped hydroelectric storage  
               of all sizes to meet in any future procurement mandate for  
               energy storage. This is not a storage procurement mandate  
               or an increase to an existing procurement mandate. AB 33  
               simply ensures that pumped hydroelectric storage is not  
               unnecessarily excluded from future energy storage  
               procurement mandates.
          


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